How Payments Will Evolve in the Next Five Years

The payment space has changed dramatically in recent years. Unsurprisingly various factors play a critical role in how payments will evolve in the next five years. Understanding these factors is essential to making the most of the payment space. 

Future of Payments

By 2026, the global payments industry is expected to make up $612 billion in revenue. Growth reached 11% in 2021 within the global payment industry. There are a variety of factors that will drive and impact the nature of this evolution. 

Bundling Solutions

Bundling is a promising path forward for the payment industry. Payments will evolve to be included in bundles of services and products to provide a single streamlined solution. In addition, payment systems have made themselves even more valuable to businesses by providing more than just simple payments. 

With systems that provide inventory management, CRM, and other business operations, payment providers have made their services the cornerstone of many businesses. This increased capability of payment systems is possible because of innovations that allow for system-wide digital transformation

Shifts in Institutions

With financial institutions investing heavily in digital transformation and providing more efficient digital financial services, cashless payments are becoming easier to spread across the economy. This is driven by customer expectations for digital solutions that they can access from anywhere and use quickly. 

Buy Now Pay Later

Buy now, pay later has also grown dramatically in popularity in recent years with little indication of going away. Buy now, pay later has improved overall customer satisfaction and reduced abandoned cart rates for online merchants. 

Despite increased underwriting standards by prominent market players such as Affirm, Klarna, and AfterPay, the buy now pay later model has surged alongside the rise in Ecommerce. There will still be growing pains as consumers and regulators adjust to this new model. Further upheaval is likely to occur as market players focus more on profitability than growth

Digital Currency

Digital currencies are one innovation that will play a critical role in how payments will evolve in the next five years. Already the majority of central banks are evaluating whether they should release their digital currencies, with some central banks already releasing their own experimental digital currencies. 

The Federal Reserve is one such central bank, as there is a lot of anticipation for the rollout of the Federal Reserve real payment system, also known as FedNow.This will allow people to make instant payments of up to $500,000, and many are fascinated by how payments will evolve from this new payment avenue. 

While it will be more expensive than ACH, it will be far more efficient than wire transfers and checks. As a result, FedNow will enable business-to-business payments to be conducted more efficiently than ever before. 


Fintech growth is critical to how payments will evolve in the next five years. With fintechs already valued well over $3 trillion and an annual projected growth rate of almost 24%, fintechs are poised to provide ever more innovations that constantly evolve payments.

Despite the more challenging environment to find funding, it is unlikely that the competition from startup fintechs will decrease. While fintechs that are reaching larger scales may have more challenges finding financing from investors, there are funds available for new fintechs to enter the market. 

Digital Wallets

The payments industry has continued to evolve alongside the broader digital transformation of the economy. While credit and debit cards remain the preferred payment type for online purchases, more and more customers are using new digital purchasing options. It is estimated that payments will evolve in the next five years so that over half of consumers will use digital wallets for completing purchases

Omnichannel and Online Payments

Consumers use a wide variety of devices through the process of finding a good or service to complete the purchase. Having omnichannel payment solutions allows merchants to avoid abandoned carts and tap into the massive potential of omnichannel customers. 

Buying online and picking up in-store has become much more popular in recent years. Additionally, most customers that choose this option purchase other items when they pick up their order in the store. 

The division between physical stores and eCommerce has eroded dramatically, with stores offering online ordering for delivery or pick-up to meet customer expectations. This has opened the door for tremendous growth in the payment industry as more merchants need digital payment solutions for this new demand. 

Decline of Cash

Despite the reopening of physical stores, cash did not rebound in usage. However, consumers became accustomed to using cashless payment options during the middle of the pandemic and continue to prefer them. 

Financial Inclusion

Financial inclusion is also expected to skyrocket as more people than ever will have access to mobile devices that can access completely digital financial services. This creates a vast opportunity for payments to be used by billions of new users. 

Cross Border Payments

With digital and online businesses expanding the ability for consumers and companies to engage worldwide, there will be increasing demand for cross-border payment solutions that are cheaper and more efficient than traditional options.  

NFC and Small Merchants

Small merchants are seeing the benefit of taking NFC payment options over cash. Customers prefer not carrying cash, and merchants can use devices as small as a phone to conduct payments rather than large and expensive registers.

 This allows small merchants to access additional services, such as reporting and inventory management, that they did not have access to before. Increased adoption by small merchants will increase the overall usage of payment networks and, in doing so, play a critical role in how payments will evolve in the next five years. 


One ongoing trend likely to stay the same is security's central role in the payment industry. The increasing sophistication and amount of fraud will shape how payments will evolve in the next five years. This will require every actor in the payment space to continue to innovate and invest in adequate security to combat fraud

Making this battle for security even more difficult is filtering out false positives. These slow down the ability of customers to access and use payments and financial services and increases the likelihood of customers leaving for a service that provides a smoother experience. 

Know Your Customer and digital identity verification will remain critical tools to protect payments from widespread fraud. Fortunately, fintechs have developed solutions that make these two tools easier to implement. 

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